Petro Stopping Centers to Restate Financials
Company incorrectly calculated depreciation expenses
EL PASO, Texas -- Petro Stopping Centers LP said that the company has determined that it had incorrectly calculated its depreciation expenses. As a result, the company will restate its financial statements for the three-year period ended Dec. 31, 2004.
The restatement relates to the company's previous depreciation of its leasehold improvements, in some cases, over a period greater than both the initial term of the lease and its option periods, but not longer than the useful life of the asset.
After an analysis of the company's [image-nocss] records on May 13, 2005, the company concluded that it should use the shorter of the initial lease term unless it believes that the penalty for not renewing the lease would be substantial enough that it was reasonably assured that the company would exercise the renewal or the useful life of the asset. The restatement relates, in part, to the Feb. 7, 2005 letter issued by the Office of the Chief Accountant of the U.S. Securities & Exchange Commission (SEC) to the American Institute of Certified Public Accountants, which clarified the existing generally accepted accounting principles applicable to leases.
The company said it believes these noncash adjustments, similar to those recently announced by other public companies related to leases, will have no material impact on the company's previously reported cash flows, cash position, revenues or EBITDA in any period or on compliance with the covenants under its senior secured credit facilities and Indentures for the 9.0% senior secured notes due 2012.
Although Petro Stopping Centers said it continues to analyze the proper accounting treatment, it currently estimates the cumulative effect of the restatement of financial statements through Dec. 31, 2004 will reduce retained earnings by approximately $805,000, reflecting increased accumulated depreciation and depreciation expense. Of the $805,000, $618,000 is anticipated to be reflected in periods prior to Dec. 31, 2001. The company anticipates that depreciation will be increased (and operating income decreased) by $128,000, $21,000, and $38,000 for the periods ending Dec. 31, 2002, 2003 and 2004, respectively.
These estimates are subject to change as the company completes its preparation of the restated financial statements, it said. The company will amend the appropriate filings with the SEC to include the restated financial statements for the three-year period ended Dec. 31, 2004. As a result of the restatement, the financial statements contained in the company's prior filings with the SEC should no longer be relied upon, it said.
El Paso, Texas-based Petro Stopping Centers is an owner and operator of large, multi-service truckstops. Since it opened its first Petro Stopping Center in 1975, its nationwide network has grown to 62 facilities located in 31 states. Of these locations, 40 are company-operated and 22 are franchised. The facilities offer a variety of products, services and amenities, including diesel fuel, gasoline, Iron Skillet restaurants, Petro:Lube truck maintenance and repair services and travel and convenience stores.